With or Without Iran, Oil Producers to Meet in April on Output Deal
Oil producers including Gulf OPEC members support holding talks next month on a deal to freeze output even if Iran declines to participate, OPEC sources said, increasing the likelihood of the first global supply deal in 15 years.
That a meeting could go ahead with or without Iran indicates a shift in the stance of Gulf oil exporters including Saudi Arabia, who had previously maintained that all major producers should participate in any agreement.
OPEC and non-OPEC producers will meet in Doha on April 17, Qatari Energy Minister Mohammed bin Saleh Al-Sada said, following a February agreement between Saudi Arabia, Qatar, Venezuela and non-OPEC Russia to stabilize output.
“To date, around 15 OPEC and non-OPEC producers, accounting for about 73 percent of global oil output, are supporting this initiative,” Sada said in a statement. Qatar holds the OPEC presidency in 2016 and has been organizing the effort.
Oil prices rose on Wednesday, supported by the announcement and on growing signs of a decline in U.S. crude production. Brent crude LCOc1 was trading above $40 a barrel, up from a 12-year low of $27.10 reached in January.
The reluctance of Iran to join an accord while it seeks to boost its oil exports to recover market share after the lifting of Western sanctions has been cited by OPEC sources as a potential roadblock to an agreement.
Sources familiar with the matter said the issue was among the factors which caused an earlier plan to hold the producer meeting on March 20 to be dropped.
But on Monday, Russian Energy Minister Alexander Novak said after talks in Tehran that a deal could be signed in April and exclude Iran. An exemption for Iran is not a deal breaker, OPEC sources said.
“It’s a setback but it will not necessarily change the positive atmosphere that has already started,” said one OPEC source from a major producer, referring to Iran saying it will not join any freeze accord.
Novak said he talked to Sada and Saudi Oil Minister Ali al-Naimi on Wednesday. With the freeze deal, the oil market would rebalance as early as late 2016, Novak said, but without it the rebalancing would not happen until late next year.
A freeze in output would at least stop adding to the excess supply that has caused prices to collapse from levels above $100 a barrel seen in June 2014.
OPEC delegates have said that further action including a supply cut could follow by the end of the year, depending on Russia’s commitment to the freeze and how much oil Iran adds to the market.
HARD TO BACKTRACK
A second delegate from the Organization of the Petroleum Exporting Countries said a pact that failed to include Iran was not the worst possible outcome.
However, “if the others freeze and the Iranians are outside the agreement, it will not help the market unless the demand is very large”, this delegate said. “January output is already at high levels.”
Backtracking on the deal would risk jeopardizing the recent rally in oil prices, other OPEC sources said.
“You can’t ignore all other oil producers. The meeting is likely to go ahead,” a third source said, adding that the April meeting was likely to discuss and finalize details of the deal. “We will not just meet for the sake of meeting.”
It was unclear whether all 13 OPEC members and which outside producers would attend. Kuwait and the United Arab Emirates have said they would commit to the freeze if other major producers also participated.
Novak said Qatar was sending invitations to all OPEC members as well as to some producers outside the organization.
“After it receives confirmations it will be possible to talk about the exact number of participants,” Novak said.
“Iran said it was ready to take part in this meeting,” he added.
The willingness of Iraq, the biggest source of OPEC supply growth in 2015, to join the deal is also important. Baghdad on Monday said the freeze initiative was acceptable.
